CASE Researching the Cost of Operating a Vending Machine and Performing Cost-Volume Profit...

CASE

Researching the Cost of Operating a Vending Machine and Performing Cost-Volume Profit Analysis Suppose that you have decided to start a small business selling snacks from vending machines. You have secured a location for one candy vending machine in a local bookstore. Rental for the space will cost $200 per month. Vending machines can be purchased at wholesale clubs such as Sam’s Club or Costco. You can also purchase the snacks to stock the machines in bulk at warehouse clubs.

Required:

1. Either visit a local warehouse club or review the club’s Web site to determine the initial cost to purchase a snack vending machine.

2. Assume you are going to have only one type of snack bar in your machine initially. What type of snack bar will you choose? If you purchase the bars in bulk, what is your cost per bar?

3. How much will you charge for each bar sold?

4. What is your contribution margin per bar? How many bars must you sell to cover the cost of the vending machine?

5. Once you have covered the initial investment, what is the monthly break-even point in number of bars? In sales dollars?

6. Repeat requirements 2–5 assuming you decided to have a drink vending machine instead of a snack machine. Remember to look up the price for a beverage vending machine. You may assume rental for the vending machine space is $200 per month regardless of its type.